Saturday’s Wall Street Journal carried a column by Jason Zweig, Brokers Win, Investors Lose Key Reform which lamented the loss of a provision in a bill now "oozing" through the Senate that would have made stockbrokers, insurance agents, and certain other financial salesmen into fiduciaries.
On the remote chance that the term fiduciary does not ring any bells, let me explain. Investment advisors and managers, including, for example, mutual fund companies, are fiduciaries. They are required to put their clients’ interests first, which basically means watching over client money as they would their own. Of course, there are limits to this, nobody would expect a mutual fund company to lower fees out of fiduciary responsibility, but by and large this works and consumers get what they expect from the relationship.
At the opposite end of the trust spectrum are ordinary salesmen and the ordinary profit-maximizing companies for which they work. Of course, the great majority of people and firms we do business with fall into this category. We know this and think nothing of it. When the waiter suggests dessert, nobody indignantly objects he is not putting the interests of the diners ahead of that of his employer. Ditto for the salesgirl at the mall who says you look great in those pants. Again, this system works and consumers get what they expect.
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Continuing a long tradition that dates back four weeks, I’m using this last day of the week and month to round up a few things I’ve found lately on the interwebs that deserve comment but not whole posts.
Kiyosaki in Canada
The Consumerist asked the other day Is Rich Dad Robert Kiyosaki Getting Rich Off Suckers? Excellent question. Let’s examine it logically.
1. Kiyosaki is rich.
2. What he does for a living is sell books and seminars.
3. Those books and seminars are basically worthless.
4. Purchasers of those books and seminars are therefore suckers.
5. Ergo, Kiyosaki has gotten rich off suckers.
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I’m breaking my usual Thursday vow of silence to pass along the news that Bad Money Advice has been nominated for a Plutus Award. I am particularly proud of the category: Most Controversial Personal Finance Blog. Fans of BMA might want to drop by the site and show their support. I’d appreciate it, and the other nominees may as well, as they likely achieved controversy less intentionally.
March is just around the corner, which means we are entering the heart of tax season. Time to gather those 1099s, fire up the old TurboTax, and wonder how we can possibly pay Uncle Sam less money next time.
So ’tis the season to think about, and write about, schemes and tricks to minimize your tax bill. For example, the AP ran an item the other day discussing the rather unlikely maneuver of teenagers opening Roth IRAs.
It’s an idea with some intuitive appeal. As readers of this blog know, Roths are attractive if you believe that the tax rate paid today is likely to be lower than what will be paid when the money is withdrawn from the IRA. A teenager with a tiny income, and thus a low marginal tax rate, certainly qualifies.
And there is the tremendous emotional appeal of "the magic of compounding" that miracle of mathematics that will drastically increase the IRA balance during the very long journey to retirement. Even with only 5% annual return, after 50 years $1 would grow to $11.46. Imagine how grateful your child will be when they retire and realize the foresight you had in making them save way back in 2010.
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If there is one theme that I cannot resist writing about, it is the sharing of the alleged secrets of millionaires. Smart Money recently gave us a typically insipid 
example with 10 Things Millionaires Won’t Tell You. (Credit where credit is due, I found it via Free Money Finance.)
I am not sure if I have said this unequivocally before, but I am a millionaire. So, using the level of scientific inquiry typical of Smart Money and its ilk, let’s validate their secrets using this sample of one.
1. “You may think I’m rich, but I don’t.”
The "I don’t" part is basically true, but I’m not so sure about the "you may think I’m rich" part. When you get down to it, a million dollars ain’t really that much money. Something like 1 in 16 US households has a net worth north of a million. Equating millionaire with rich made sense a hundred years ago, but today I think the lifestyle most would associate with rich would start at around $10 million in net worth.
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On the remote chance that the term fiduciary does not ring any bells, let me explain. Investment advisors and managers, including, for example, mutual fund companies, are fiduciaries. They are required to put their clients’ interests first, which basically means watching over client money as they would their own. Of course, there are limits to this, nobody would expect a mutual fund company to lower fees out of fiduciary responsibility, but by and large this works and consumers get what they expect from the relationship.
Government, Investing, Media | Frank Curmudgeon | 
March 1, 2010 12:59 pm | 
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